First In First Out: A Stock Management Method to Reduce Waste in the Food Business

Have you ever heard of the term FIFO in the food business world? FIFO, or First In, First Out, is a stock management method where the first items to enter the warehouse or store are the first ones to be sold or used.

In the food industry, which often deals with products that have short expiration dates, FIFO is essential. This method ensures that older items are sold or used first, maintaining product quality and minimizing waste.

FIFO not only improves inventory flow but also supports operational efficiency and reduces losses that may occur if products aren't sold in time. Let’s dive deeper into how FIFO can benefit your food business!

What is First In First Out?

As briefly mentioned earlier, there are various ways to manage stock in the business world, and one of the most popular methods is FIFO. What does it mean? Simply put, FIFO follows the rule of “first in, first out.”

This means that the first items entering the warehouse or store are the first to be sold or used. Simple, right?

This method is particularly useful in retail industries like food stores, bakeries, or minimarkets, where products usually have short shelf lives.

Imagine freshly baked bread from yesterday competing with older bread nearing expiration. With FIFO, the bread that entered the store first will be sold first, ensuring customers always receive fresh goods.

If you’re in retail or operate a business with perishable products, FIFO could be the best solution to ensure smooth operations.

Read also: What Is VOID & Its Impact on Food Businesses?

Benefits of Implementing FIFO in the Food Business

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FIFO ensures that older products are used or sold first, maintaining product quality and operational efficiency. For items with limited shelf life, such as food and beverages, this method helps preserve quality and avoid losses due to expired goods. Here’s why FIFO is ideal for food businesses:

1. Preventing Product Quality Decline

With FIFO, the first items to enter are the first to be sold. This reduces the risk of quality degradation, keeping products fresh and reducing waste—essential in the food business.

2. Simple and Universally Applicable

FIFO is a straightforward method that’s easy to implement in various food businesses. By following the sequence of inventory inflow and outflow, it organizes stock management and simplifies cost-of-sales calculations, making it ideal for efficiency-focused businesses.

3. More Accurate Financial Reports

One major advantage of FIFO is improved financial reporting accuracy. Since calculations are based on the order of stock entries, reports become clearer and easier to understand. Any discrepancies or manipulations can be detected quickly, ensuring transparent financial statements.

4. Lower Cost of Goods Sold (COGS)

FIFO helps maintain lower COGS as the first inventory items are typically priced at older, often cheaper rates. This can result in higher gross profits, even when market prices are rising.

5. Reducing Inventory Quality Decline

FIFO ensures that older items in storage are sold promptly, reducing the risk of spoilage or expiration. This is especially beneficial for industries selling perishable goods, like food or medical products.

6. Easy and Reliable Implementation

FIFO is easy to understand and implement. Its straightforward process makes it a reliable and efficient choice for businesses of all sizes.

Read also: Trending! Food Influencers to Boost Your Culinary Business Sales

Conclusion

That’s an explanation of the First In, First Out (FIFO) method, which helps manage stock more efficiently, reduces waste, and maintains product quality.

FIFO is an effective solution for food businesses. To simplify its implementation, ESB Core offers a comprehensive ERP system. With Inventory & Stock Management features, you can monitor stock in real-time, ensuring optimal inventory levels. Plus, with Detailed Sales Reports and integration with a Business Intelligence (BI) System, you can manage your business more efficiently.

Optimize your business now with ESB Core!